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How Monsanto Got into the Machinery Business

May 31, 2012

Last week there was big news as Monsanto announced its intent to acquire Precision Planting. Yes, that Precision Planting—the company that sells seed meters, monitoring and precision ag equipment.

This news left some asking why would Monsanto buy an aftermarket planter equipment company. While others saw the natural link between the two companies, particularly since Monsanto’s announcement of its Integrated Farming System.

I was able to speak to Precision Planting founder and owner Gregg Sauder as well as catch up on the anouncement by Monsanto, and here's what we reported last week:

This acquisition will help complete Monsanto’s Integrated Farming System (IFS) platform, which aims to marry the genetic knowledge of seeds with the technologies of strategic field placement for maximum yield.

"Precision Planting offers aftermarket technology that works with some of the original equipment manufacturing planting equipment, John Deere equipment, AGCO equipment, Kinze equipment and helps to refine and improve it," says Robb Fraley, chief technology officer of Monsanto. "It also creates the potential and I think it leads to natural collaborations with these larger equipment manufacturers."

Precision Planting was founded in 1993 by Gregg Sauder and his wife, Cindy. Today, the company’s software and hardware products include seed metering, yield mapping, planter monitoring and fertilizer attachments.

"When we stepped into harvest monitors, we showed that as a company, we were beyond just planting, and we wanted to close the information loop in farming," Sauder says. "By joining the IFS platform, I believe this is where our company needs to go, and it’s another whole level. It’s not just positioning seeds for success, but it is changing the way that farmers think about corn production. This is the step we were always missing before the opportunity with Monsanto."

With its first product expected to launch in 2014 in the Midwest, IFS was introduced as a concept in November 2011. It is a proposed platform that will combine the knowledge of seed genetics with known soils and field data and then equipment to strategically plant corn for maximum yields.

"We were able to test last year that our predictive algorithms, our scripts, which we will call FieldScripts, really work. Last year, we tested with a large number of growers. We saw on average about a 10 bu. per acre yield increase with our FieldScript versus the other farmers' own practice," Fraley explains.

Sauder says that IFS is what changed his mind about selling the company he founded almost 20 years ago.

"If you would have asked me two years ago if I would ever sell Precision Planting, I would have said no," he explains. "But I knew there would be potholes in our path to growth, and I can say that IFS has smoothed out our future. This acquisition by Monsanto will give us broader opportunities and security. We will go further faster."

Precision Planting will remain headquartered in Tremont, Ill., and all 120 employees will be offered the opportunity to stay on with the company. Sauder, who will continue to lead the company, had the opportunity to discuss the acquisition with employees late last night and have smaller breakout conversations this morning. A team of two dozen Precision Planting employees has been on the phone reaching out to the company’s distribution network to answer questions since the announcement. Precision Planting first partnered with seed salesman to build its distribution network, and today some of that network includes businesses that already represent Monsanto brands.

Monsanto has agreed to pay $210 million for Precision Planting, and an additional performance based payment of $40 million is also part of the acquisition.